ENERGY UNION

Over the past 15 years, Azerbaijan has managed to radically upgrade its power industry doubling the system's output capacity. The industry's installed generating capacity is also planned to grow over the next two or three years which opens up wide prospects for the country to export electricity. The ceremony held the other day to launch a 500 kilovolt power transmission line joining the power grids of Azerbaijan, Georgia and Turkey will contribute to the implementation of these plans. 

Demand from non-oil sector

According to statistics for the past few years, this country's power stations generate an average of 19 to 21bn kWh of electricity annually. It is notable that the civilian sector has appreciably stabilized its demand for electricity. This is largely due to large-scale modernization of distribution networks and all-round introduction of up-to-date consumption metering systems which have minimized technical losses and electricity theft. This is why the pace of consumption growth is not very high in this sector. The main demand for electricity is in the sectors of industrial production, construction, farming, telecommunications, services and others. 

In terms of total energy output, Azerbaijan generated 21.3bn kWh in 2012 exceeding the pre-crisis peak output of 21.2bn kWh registered in 2008. By and large, the system currently generates more than enough to meet domestic demand, so that further growth can be achieved through export. 

Having built the region's strongest energy system, Azerbaijan enabled itself to stop importing electricity back in 2008 and start exporting it to neighbouring states. Its export volumes are far below Azerenerji's potential capabilities. Thus for instance, Azerbaijan sent some 104.7m kWh of electricity abroad in January-October 2013 while its total output is 19.3bn kWh. Thus the volume of electricity export is 183 times lower that its generation. The main obstacle to growth in power export volumes was underdeveloped transmission infrastructure especially in the westward direction.  

It should be said that the past few years have seen growing disproportion between the high generation potential and insufficient export. Running its generating facilities at full load today, the national power industry can easily turn out about 25bn kWh of electricity annually. That would exceed the country's current need for electric power by 20-22 per cent. 

Tentatively by 2015, after the launch of the second phase of the thermal power station Simal and some other generating facilities, the installed power capacity of the national power industry can be increased to 7,500 MW or more. That will open up broad opportunities for the country to generate additionally about 5-6bn kWh per year and export unused electricity.  

New Energy Bridge

It is planned that the bulk of generated power will go westward under the Azerbaijan-Georgia-Turkey Energy Bridge project launched in April 2009 after the three neighbouring states' energy ministries signed a memorandum on mutual understanding in Tbilisi. Over the years that have passed since then, the project partners have implemented a large-scale modernization of the transmission system replacing many hundred kilometres of power transmission lines and renovating or rebuilding several substations. 

Just before efforts to carry out these plans were launched five years ago, the Azerenerji joint stock company embarked on a government programme to renovate Azerbaijan's domestic grids in 2008-2015. Included among facilities to be modernized on a priority basis were power transmission lines ranging from 500 to 0.4 kV connecting big power stations in Mingacevir and Sirvan with substations throughout the country. Efforts also started at that time to renovate the infrastructure for power transmission in the western direction. In particular, during the first phase, a 70 km long stretch of power transmission line from Mingacevir to Samux and a 500 kV substation in Samux were completely reconstructed. Efforts were completed to reconstruct a 131 km long power transmission line from Samux to the Georgian border as well as a 330 kV power transmission line extending from Mingacevir to Qazax-Aqstafa. By the end of 2011, the modernization was completed of a 150 km long 500 kV overhead transmission line from Mukhranis to Veli. 

In 2012-2013, the full amount of construction work was also completed in the Georgian section: a new 400 kV power line was run between Akhaltsikha and Borchkha to connect the energy systems of Georgia and Turkey. The 330 kV Gardabani power line was also renovated. 

"All the high-voltage power lines and substations located in the direction of the Mingacevir, Samux and Gardabani substations have been completely retrofitted. Only an insignificant amount of work remains to be done in the direction of Turkey. The issue of tariffs will be discussed shortly afterwards and then Azerbaijan's electricity can be exported to Turkey and further to European markets," said Azerenerji President Etibar Pirverdiyev. 

The energy ministers of Azerbaijan and Turkey as well as representatives of the European Union took part in a ceremony held as part of their official visit to Georgia on 11 December to launch facilities of the new energy corridor. The 500/400/220 kilovolt Akhaltsikha substation and a 400 kilovolt power line joining together the energy systems of Georgia and Turkey came into operation. 

"The formation of the Azerbaijan-Georgia-Turkey energy bridge is the basis of the Black Sea Transmission Network project designed to export electricity to the Turkish market and further to Southern Europe. This project is quite significant for Azerbaijan both in political and economic terms. We are happy to take part in such initiatives aimed at enhancing the wellbeing of the peoples and the economic development of the region," said Azerbaijan's Energy Minister Natiq Aliyev.  

Within the Black Sea Transmission Network project, Azerbaijan and Georgia are planning to supply 1,200 MW of electric power to Turkey in equal proportion. The project as a whole envisages annual re-export of up to 2,000 MW of power from Turkish territory to Bulgaria, Greece and other states of Southern Europe. Meanwhile Azerbaijan's energy system alone already today has the potential to export no less than 3bn kWh to Turkey's eastern regions. 

It is noteworthy that Azerbaijan is also planning to use the potential of the newly built transmission infrastructure to clear off Azerbaijan's debt to Turkey. "The debt arose over supplies of Turkish electricity to the Autonomous Republic of Naxcivan: only 1.5bn kWh out of the total debt of 3.6bn kWh has been paid off over the past five years. Azerbaijan will gain more from using the energy bridge as it will make it possible to sink the debt practically at once without protracting the process for 5-10 years with growing production and technical costs," said Azerbaijan's Deputy Energy Minister Natiq Abbasov. According to him, by using this scheme to repay its debt to Turkey, Azerbaijan will provide full load for its generating facilities and thus tangibly increase power generation efficiency in the Azerenerji system. 

The Georgian partners in the Energy Bridge project also gave quite a positive assessment of prospects for the joint initiative. According to Georgian Prime Minister Irakliy Garibashvili, the pooling of the Georgian and Turkish energy systems is of great importance for the entire region, let alone the fact that the new infrastructure will provide steady supply for the west of the country and make it possible to export power surplus to Turkey during the summer period. The energy ministers of Turkey and Georgia also agreed to set up an intergovernmental commission to work on new projects in power industry, in particular, for building new power transmission lines and substations in order to further increase the energy bridge throughput. 

Export plans 

So the new energy bridge will shortly be brought into operating condition launching the "big" transit of electricity from Azerbaijan to Georgia and further to Turkey. 

Yet Azenerji's export plans are not confined only to the westwards direction. A no less promising project is being implemented by the energy ministries of Baku, Moscow and Tehran to expand energy exchange and develop transit of electricity. Aspects of this project were actively discussed by the energy ministers during the 44th meeting of the CIS Electric Power Council held in Moscow in October. 

An intergovernmental agreement on efforts to ensure the parallel operation of the Unified Energy System of the Russian Federation and the energy system of Azerbaijan was signed in June 2013 opening broad opportunities to expand cooperation between the two states. 

It is remarkable that there are no obstacles that are in the least bit serious to implementing this agreement. The energy systems of Azerbaijan and Russia have for a long time been connected by two transmission lines: Derbent (330 kV) and Yalama (110 kV). Energy exchange between Azerbaijan and Iran is carried out using five lines: Parsabad I (230 kV), Parsabad II (330 kV), Astara (110 kV) and the 132 kV power transmission lines Culfa and Araz run across the republic of Naxcivan. Those transmission systems have been used for many years by Azerbaijan, Russia and Iran for electricity exchange with the use of offset payments.

Subsequently, if electricity export accords are concluded and if Russia signs up to those projects, the volumes of supply will essentially grow covering the capacious market of Iran. The possibility should not be ruled out of their expansion towards other Middle East states.